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A small Salina water utility dogged by allegations of poor quality and financial mismanagement is incapable of serving its customers, and regulators should consider putting it in the hands of a third party, according to a report this week.

A report dated Monday from Kansas Corporation Commission staff indicated they had found Howison Heights to be incapable of providing “sufficient and efficient” service to its customers. The KCC regulates the state’s public utilities, including a small number of water providers.

“Not only is it unable to manage its financial affairs, but it is also unable to provide even a modicum of utility services to its customers without substantial assistance from consultants,” the report said.

The report found Howison Heights’ financial standing too weak to make necessary improvements to its system without a substantial cash infusion. The utility has sought Chapter 11 bankruptcy protection to reorganize, but the report indicated Howison Heights’ debt levels were such that it was unlikely to reorganize successfully.

“It is clear that the long-term problems of this utility cannot be solved simply by increasing rates,” it said.

KCC staff recommended in their report that the agency monitor Howison Heights’ bankruptcy and get involved if necessary. They also advised the three commissioners to consider holding a hearing to determine if a third party should run Howison Heights, or if nearby utilities should be allowed to serve its customers. The three commissioners didn’t vote on the motion at their Thursday meeting.

Documents filed with the KCC during the rate case had shown Howison Heights and owner Tim Howison hadn’t paid property taxes to Saline County in 2010, 2011 or 2012. The Citizens’ Utility Ratepayer Board also reported Howison Heights’ records were in such disarray that it couldn’t verify the utility had forwarded fees paid by customers to the state or paid sales tax to Saline County. It also stated owner Tim Howison had mingled his personal finances with the utility’s.

Finances aren’t Howison Heights’ only problem. Howison Heights customers still were making complaints that the smell of chlorine in their water was so strong that it made it difficult to shower as of October despite a KCC order in July to make repairs, and they were ordered to boil water before consuming it until Nov. 15 because at times the level of chlorine was too low, meaning bacteria might multiply in the water.

More than one-third of homeowners served by Howison sent letters or emails to the KCC during a public comment period arguing against a $48,702 rate hike or complaining of poor water quality, low water pressure, fraudulent meter reading, water main breaks and lack of fire hydrants. The three-member commission had approved a slightly smaller increase, at $47,231, but that order was later set aside because of allegations it had violated the Kansas Open Meetings Act.